New 20-day Lows Continue to Gain on New Highs, S&P Rallies

A morning selloff was met with solid institutional buying Thursday, leading to a sharp mid-day turnaround and a slightly higher close. TICKscore closed at +25, Cumulative TICK +30,000. NYSE TICK surged to an intraday high of +1419, its highest level in over two months. Looking back at previous instances in which the NYSE TICK initially recorded its highest intraday reading in two months, there’s a definitive tendency for the market to trade sideways-to-lower short-term. The last thirty occurrences are listed in the table below along with the performance of the S&P500 over the next two sessions…

NYSE TICK Hits Two-Month High
08/27/09… S&P500 ??? two sessions later
08/21/09… S&P500 +0.2% two sessions later
05/18/09… S&P500 -0.7% two sessions later
02/24/09… S&P500 -2.6% two sessions later
10/17/08… S&P500 +1.5% two sessions later
09/18/08… S&P500 +0.1% two sessions later
09/05/08… S&P500 -1.4% two sessions later
07/08/08… S&P500 -1.6% two sessions later
03/26/08… S&P500 -1.9% two sessions later
01/23/08… S&P500 -0.6% two sessions later
06/27/07… S&P500 -0.2% two sessions later
06/12/07… S&P500 +2.0% two sessions later
06/08/07… S&P500 -1.0% two sessions later
03/21/07… S&P500 +0.1% two sessions later
03/12/07… S&P500 -1.4% two sessions later
12/20/06… S&P500 -0.9% two sessions later
11/30/06… S&P500 +0.6% two sessions later
08/29/06… S&P500 -0.0% two sessions later
05/19/06… S&P500 -0.8% two sessions later
01/03/06… S&P500 +0.4% two sessions later
04/12/05… S&P500 -2.2% two sessions later
04/07/05… S&P500 -0.8% two sessions later
07/12/04… S&P500 -0.3% two sessions later
05/14/04… S&P500 -0.4% two sessions later
05/12/04… S&P500 -0.2% two sessions later
03/05/04… S&P500 -1.4% two sessions later
02/02/04… S&P500 -0.8% two sessions later
08/26/03… S&P500 +0.6% two sessions later
07/01/03… S&P500 +0.4% two sessions later
04/30/03… S&P500 +1.4% two sessions later
04/28/03… S&P500 +0.2% two sessions later

Note that in only five cases did the S&P gain more than 0.5% over the next two sessions, while it fell more than 0.5% fourteen times. In general, unusually high intraday TICK readings often means buying power is spent for the short-term.

Thursday marked the third consecutive session that the S&P closed higher while the spread between new 20-day highs and lows declined. There have been thirteen separate instances in the last five years in which the S&P closed higher two days while the 20-day High-Low Spread declined both days (meaning new 20-day lows were gaining on new highs). Market performance over the next two days was mixed, with the S&P declining 7 times and rallying 6 times. However, on those 6 occasions when the market shrugged off the declining spread, the S&P was higher two weeks later in each case. Not surprisingly, when the market rallies despite  internal weakness, it has bullish implications for the intermediate-term. Given that we just saw two up closes with a declining 20-day High-Low spread on Wednesday, that puts the spotlight on Friday’s close. A settlement above SPX 1028 would mark only the seventh time in the last five years that the S&P has continued to push higher in the face of deteriorating 20-day Highs-Lows, and would tend to indicate further price gains heading into the September 14th time frame.

Categories : Archived EOD Commentary, End-of-Day Commentary

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